The Chechen capital of Grozny came under the heaviest assault of the three-month Caucasus conflict yesterday as hundreds of Russian rockets rained down into the city, sending thousands of terrified residents fleeing to safety.

Huge columns of orange smoke rose into the frigid night sky during the bombardment that Russian military officials said was the opening of a third phase of the conflict designed to retake the capital of the breakaway republic within two weeks.

Russian forces, eager to avoid suffering thousands of casualties from street fighting like they did in the 1994-1996 conflict, are planning to continue the bombardment until the rebels surrender.

The fierce assault came as fresh turmoil hit the Kremlin, with confirmation that Russian President Boris Yeltsin is seriously ill once again — this time with a viral infection and acute bronchitis.

Yeltsin’s illness forced him to cancel a ceremony to commemorate the reunification of Russia and Belarus and is expected to keep the frail and erratic 68-year-old leader sidelined for at least a week.

It was the tenth time in his storm-tossed tenure that the Kremlin has announced Yeltsin is incapacitated and it comes at a critical juncture in the Chechen conflict, when Russian forces are on the verge of retaking the capital amid growing international condemnation over the indiscriminate bombing of civilian areas.

Yesterday’s blitz sent thousands of terrified residents scrambling for cover.

Some made their way past Russian lines holding white flags. Thousands more were hiding in freezing basements — venturing outside for food only at night when most of the bombing has stopped.

Refugees are also reporting that Russian security forces are arresting increasing numbers of people along the border with Ingushetia.

And at a refugee camp on the other side of the border, a handful of drunken Russian soldiers opened fire into a crowd of people, killing a 21-year-old woman and at least three other people, Western news agencies reported.

But top Russian officials were unfazed by the growing concern over the plight of the Chechen civilians.

Prime Minister Vladimir Putin, whose popularity has been soaring since the Chechen conflict began, said Russian forces, which have nearly encircled Grozny, would not stop until Islamic rebels are crushed.

“It is not our aim to encircle the terrorists. Our aim is to destroy them and bring them to justice,” Putin said.